Purchasing departments use a variety of manual and informal methods and techniques for evaluating suppliers. Companies often evaluate suppliers based on their past performance. Companies may review such factors of past performance as the timeliness of deliveries and the quality of delivered products before deciding whether to conduct business with a particular supplier in the future. Many companies maintain preferred supplier lists based on each supplier's past performance. The suppliers on the lists are believed to have the ability deliver high quality products in a timely manner because, in the past, they have performed adequately. A company may rely on the list to select suppliers who are then asked to supply products, parts, or materials to the company.
Although purchasing departments have developed preferred supplier lists and other manual and informal techniques for selecting suppliers, these approaches are not always reliable. First, the past performance data may not be updated in a consistent manner. As a result, the purchasing department may rely on outdated data to select a supplier and make a purchasing decision. In addition, the past performance data does not provide any indication that the supplier has the ability to meet the customer's current requirements. If the purchasing department relies on outdated data that is not indicative of the supplier's current ability to perform, the company may choose suppliers that cannot meet its requirements. The supplier's inability to perform may then impact the company's business resulting in increased costs and reduced profitability to the company.
Some systems and methods for evaluating suppliers have been developed. U.S. Pat. No. 5,765,138 to Aycock discloses an apparatus and method for providing interactive evaluation of potential suppliers using quality process maturity data. The disclosed apparatus and method comprise a database with maturity requirements and recognized quality standards, and a processing system for comparing project objectives to selected standards and quality maturity requirements. The apparatus and method evaluate the processes used by a supplier to provide services such as software development services. The apparatus and method do not evaluate the stability of a supplier by analyzing the ability of a supplier to provide products, parts, or materials. In addition, the apparatus and method do not consider past performance data as well as other data that may be indicative of a supplier's ability to deliver products, parts, or materials.
The prior art does not disclose a system and method for analyzing past performance data and other data to detect supplier instability so that corrective action may be taken to minimize the impact of the supplier's instability on a business.